Street Cost For Cannabis Lower Than Legal Price Point, Statscan Finds

Article by Mike Hager, The Globe and Mail

Estimated cannabis consumption, by age group. Street cost for cannabis lower than legal price point, Statscan finds. Federal Finance Minister Bill Morneau announced a week ago that the price that the provinces and federal government are proposing for legal cannabis is $10 a gram including a federal excise tax of $1 or 10 per cent, whichever is higher.

Statistics Canada has published new data on the street value for cannabis showing it could cost at least 13 per cent less than the proposed legal price.

The price point will be crucial as nearly a century of prohibition ends: While some people may be willing to pay a slight markup for the quality and security of the legal product, others may opt for the cheaper, underground supply, especially if they are already used to buying it that way.

Federal Finance Minister Bill Morneau announced a week ago that the price that the provinces and federal government are proposing for legal cannabis is $10 a gram including a federal excise tax of $1 or 10 per cent, whichever is higher.

That would make legal cannabis considerably higher than the $8.84 per gram a Statscan report released on Monday found people were willing to pay on the black market in 2015.

That study found Canada’s underground cannabis trade was worth as much as $6.2-billion in 2015 – almost as much as the legal wine market. The report assumed a price range of $7.14 to $8.84 a gram to determine the market would have represented around 70 per cent to 90 per cent of the size of the $7-billion wine market in the most recent year Statscan analyzed. Meanwhile, PriceOfWeed.com, the crowdsourcing site Statscan plans to use to help it figure out how much cannabis costs on street corners, currently pegs the average gram of “high quality” dried cannabis at $7.56, based on almost 10,000 submissions over the past seven years.

Vancouver Councillor Kerry Jang, co-chair of B.C.’s provincial-municipal committee in charge of crafting the province’s cannabis rules, said the Statscan report underscores how the federal government should lower its proposed cost of $10 a gram or risk letting the underground trade continue to flourish.

“Whether [illegal cannabis] is a dollar or two [cheaper], in this day and age people will always look for the best price, so why increase the risk?” said Dr. Jang, architect of Vancouver’s landmark cannabis dispensary bylaw. “Where Ottawa came up with that $10 we have no clue.

“It was a surprise, it was probably a bunch of politicians trying to figure out how much money they can make or get without actually doing the research.”

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